The ADB Board of Directors today approved a $1 billion multitranche financing facility for the Railway Energy Efficiency and Safety Enhancement Investment Program. It is the first program of its kind to target the promotion of energy efficiency, environmental sustainability, and improved safety through ADB's transport operations and in the PRC transport sector. It is also the first investment in the PRC transport sector to utilize the multitranche funding mode, which has major advantages, including flexibility for both the government and ADB, and the linking of the release of funds to project readiness.

The program will support the government's $25 billion 7-year plan to expand and improve railway services in underserved and underdeveloped southwestern regions, including Guangxi, Guizhou, Sichuan, and Yunnan provinces, and Chongqing municipality. The program is a priority government investment and is part of its economic stimulus package, announced in October 2008, in response to the impacts of the global financial crisis. By focusing on safety, energy efficiency, and environmental improvements, ADB will be able to deliver significant benefits to railway development for a far smaller cost than would be needed to fund tracks or other major infrastructure.

“The program will deliver broad benefits including reduced economic losses and lower energy bills for the government, reduced carbon emissions, safer trips for the public, faster more cost-effective freight services, new employment opportunities in underdeveloped areas, and increased integration of the southwest with its neighbors, including Viet Nam and the Greater Mekong Subregion,” said Manmohan Parkash, Principal Transport Specialist in ADB's East Asia Department.

Program funds will be used to purchase equipment to improve safety and energy efficiency, and to protect the environment, including a moving train fault detection system, and smart electronic devices that can help reduce power consumption and carbon emissions. Technical assistance will also be provided to review and overhaul existing arrangements for integrating energy efficiency and environmental considerations into railway management and operations, and to train staff in the use of new technologies and maintenance techniques.

The program continues ADB's support to the government for safety and energy efficiency improvements in the railway sector where ADB works closely with development partners, including World Bank, Agence Française de Développement, and others. It is also expected to spur new opportunities for the private sector to get involved in developing new technologies for the railways industry, and to provide modern, energy-efficient equipment.

The multitranche facility will provide just over 30% of the full program investment cost of $3.24 billion, with the government contributing about $2.24 billion. ADB's funds are in the form of loans from its ordinary capital resources, with the tenor and other terms to be decided under individual agreements, and interest rates set in accordance with ADB's LIBOR-based lending facility.

In the first tranche, ADB will provide a $300 million loan with a term of 26 years, including a grace period of six years. A technical assistance grant of $600,000 from ADB's concessional resources will be provided. The Ministry of Railways is the executing agency for the program, which will be implemented over seven years to 2016, with between three to six periodic requests to ADB for finance.#